Notes from the 2015 Wine Market Council (or Drink Less Beer)

The Wine Market Council (WMC) gave its 10th annual presentation of U.S. wine consumer trends in Yountville, California earlier this month. Wine Opinions CEO John Gillespie serves as president of the Council, and he kicked off the presentation with a summary of the WMC’s yearlong research on wine consumer trends.

Gillespie cited a dip in growth for occasional wine drinkers, thanks to the proliferation of craft beer and spirits drinkers (more on that later), leading the WMC to focus more on high-frequency buyers. High frequency wine drinkers made up roughly 13 percent of the total US population of 228 million (the balance is comprised of 36 percent abstainers, 27 percent occasional drinkers, and 24 percent who don’t drink wine).

It is within that 13 percent of high frequency wine drinkers where Gillespie cited the greatest opportunity for growth, as over one-third of that group (37 percent) increased their consumption over the past year.

While overall, women outnumber men as wine drinkers 54 percent to 46 percent, high frequency wine drinkers are split evenly between the sexes.

When broken down by generation, baby boomers represent 38 percent of high frequency wine drinkers, millennials 30 percent, Gen X-ers 19 percent and older generations(those over 69 – others have called these the Swing, Silent and WW2 generations) are 13 percent. As boomers and older generations continue to age, their wine drinking habits will start to drop, leaving millennials as the next big wine-drinking generation.

Among wine varieties, red blends are growing at almost 14 percent by value, and almost 40 percent of new wines released are now blends. Gillespie credited millennials with this trend, as this generation values the experimentation with flavor profiles that varietal blends can provide. Cabernet Sauvignon, Sauvignon Blanc, Pinot Noir and Moscato continue to see healthy growth, while Syrah/Shiraz and White Zinfandel saw the sharpest declines.

Blends have more fun.

Interestingly, among frequent wine drinkers, millennials seem to rely most on reviews, with 56 percent considering them very or extremely important but those figures drop with age. Generation X cited 42 percent, baby boomers 21 percent and only 15 percent of those over 69 believe reviews are important. (The numbers of course shift when looking exclusively at high-end wine buyers, with 63 percent of those who regularly purchase $20+ wines finding reviews extremely or very important, aligning with only 22 percent of other buyers).

The only thing the wine industry has to fear is beer itself.

The point that was most often stressed throughout the presentation was how beer, craft beer, spirits and hard cider are increasingly becoming major competitors to wine, particularly among younger drinkers thanks to the high quality that can be enjoyed at far lower prices.

The Wine Market Council cited the steep rise of wine prices in the early-mid 90s as the core reason why Gen X-ers eschewed wine in favor of more affordable beverages as they reached drinking age. As a result, Generation X never caught up with their boomer and millennial counterparts with regards to wine consumption. This is an important point to consider with regards to the Nielsen findings that were also presented:

Nielsen statistics show the fastest growth rate in sales of wine is in the category above $12, while wines below $9 are dropping in sales. This could prove problematic with what is being called the ‘iGeneration’ – those born after 1995 – the first of whom will reach drinking age next year and could face similar wine pricing obstacles as their Gen X counterparts.

In lieu of wine, these young drinkers may opt instead to spend their paychecks on the wider selection of high quality beer and spirits.

Gillespie already cites craft beer as the most evident obstacle in getting younger millennial men in their 20s as turned on to wine as their female counterparts, but this is a trend that could continue to grow across both demographics as wine becomes less accessible at the value level. Additionally, as craft beer becomes a more acceptable alternative to wine in restaurants, wine sales to that demographic will continue to slide. This is an unsettling trend indeed for the wine industry.

Some have cited clouds forming over the industry thanks to the slowdown in U.S. wine consumption since 2008 (when annual growth slowed from 2.5 percent annually from 1994 to 2007, to 2 percent or less in every year but one).

However, even if these numbers mean a relative leveling off, it is important to note that the outlook is still far sunnier than that of our European counterparts. According to recent studies by the OIV (International Organization of Vine and Wine), major wine-producing countries such as Italy and France have coupled with changing trends and cultures to lead to a steady decline in wine consumption over the last decade.

The surveys found that volume is down in all wines selling for less than $9, but up for all above; the fastest growth is in wines selling for $12 to $15 at 9 percent, while wines over $20 are growing at only 4 percent. Wines at the higher end of this spectrum appear to be immune to come of the more unsettling trends towards craft beer and spirits. Premium wine growth could slow gradually over time however, especially if young iGeneration palates don’t have the same early exposure to wine as millennials did as they reached drinking age on their student/entry-level budgets. Fewer value options mean fewer opportunities to capture young wine drinkers, which could have an adverse effect on the premium sectorin the long term as iGeneration salaries mature (without the commensurate mature wine palates as their millennial counterparts).

It should be noted that these statistics are not inclusive of figures reported by all major retail chains (Costco and Trader Joe’s do not report numbers and are huge importers of wine) or many other on premise outlets leading many at the conference to proclaim it best to take these predictions with a grain of salt.

Alex Fondren is an Account Executive at Charles Communications in San Francisco.

All the Swirl is a collections of thoughts and opinions assembled by the staff and industry friends of Charles Communications Associates, a marketing communications firm with its headquarters in San Francisco, California. We invite you to explore more about our company and clients by visiting www.charlescomm.com.